bring an infringement suit, to threaten a suit, or to insist on a license is privately initiated. Here, antitrust can be brought to bear, but its limitations are evident. In this area the conduct is typically unilateral. This means that it must be addressed under § 2 of the Sherman Act, which reaches only monopoly or attempts to monopolize. As a result, antitrust reaches only instances of improper patent infringement where monopoly is threatened.
While the Patent Act explicitly authorizes enforcement by the filing of infringement actions,414 it does not authorize improper, anticompetitive actions. In addition, access to courts and other enforcement tribunals is strongly protected under the United States Constitution, without regard to the subjective intent of the plaintiff. Objectively baseless enforcement actions are not protected.415
In Walker Process Equip., Inc. v. Food Mach. & Chem. Corp., the Supreme Court held that an infringement lawsuit based on a patent that had been fraudulently procured could be the basis of an antitrust violation, provided that the structural elements of an antitrust offense were present as well.416 The lawsuit must be “baseless” under an objective test, considering whether a reasonable patentee knowing the facts would have believed the suit to be proper.417
If the conduct does not threaten monopoly, then the patent may be found invalid, but any further discipline must come through the patent court. For example, the exceptional case provision in the Patent Act, discussed below, may shift some attorney’s fees for litigation misconduct, but the remedy will not go beyond that. The inadequacy of these remedies leads one to expect that the amount of deadweight loss caused by improper enforcement actions is significant, particularly where the probability of detection is low. This is the
414 35 U.S.C. § 271(d)(3) (2012).
415 On the Noerr-Pennington doctrine and protection of access to the courts in antitrust cases, see 1 AREEDA &HOVENKAMP,supra note 9, ¶¶ 201–203. On patent infringement actions specifically, see 3 AREEDA &HOVENKAMP, supra note 9, ¶ 706.
416 See Walker Process Equip., Inc. v. Food Mach. & Chem. Corp., 382 U.S. 172, 174–
80 (1965).
417 See Prof’l Real Estate Investors, Inc. v. Columbia Pictures Indus., Inc., 508 U.S. 49, 60–61 (1993).
reason that antitrust law has a damages multiplier—designed to offset the fact that violations are difficult to detect and prove.
A good illustration of this problem is Dippin’ Dots, Inc. v. Mosey, in which the patent on a popular ice cream concoction was invalid because the patent applicant had lied about barring prior sales made a decade earlier at small fairs.418 When the patentee later filed an infringement action, the sales were discovered and the lower court found both patent invalidity and an antitrust violation. The court awarded trebled attorney’s fees to the infringement defendant under the antitrust attorney fee award provision.419 The Federal Circuit reversed the antitrust judgment, however, concluding that the antitrust laws required something more than mere enforcement of an improperly obtained patent.420 It also reversed the judgment granting attorney’s fees as antitrust damages.421 The result is that the only penalty that Dippin’ Dots suffered was invalidation of its patent. The patent was already invalid, however. It never would have issued but for the false declaration that there had not been any disqualifying prior sales. Further, the court seems to have lost sight of the fact that clearly there was something more—the patentee had not merely obtained the patent fraudulently, but it also filed an infringement action several years later, knowing the patent to be invalid if the true facts were known.
What makes the Dippin’ Dots rule particularly troublesome is that prior sales that bar patentability are “off record,” known to the patent applicant but typically not to others. The patent applicant provided a sworn statement that there were no barring prior sales or uses.422 This makes the problem different than for a patent subsequently declared invalid because the applicant failed to mention known prior art423 or took inconsistent positions in front of different enforcement tribunals.424 These failures are usually on the record and discoverable later, given that many more resources are poured into patent litigation than into initial patent procurement.
The Supreme Court has partially corrected this imbalance by strengthening the Patent Act provision authorizing judges to award attorney’s fees to
418 Dippin’ Dots, Inc. v. Mosey, 476 F.3d 1337, 1340–41 (Fed. Cir. 2007).
419 See id. at 1342, 1349 (citing Dippin’ Dots v. Mosey, No. 05-1330, slip op. at 3 (Fed. Cir. May 1, 2006)); see also 15 U.S.C. § 15 (2012) (providing for treble damages and attorney’s fees to a prevailing antitrust plaintiff).
420 Dippin’ Dots, 476 F.3d at 1347–48.
421 Id. at 1349.
422 See id. at 1341; see also In re Cygnus Telecomms. Tech., LLC, Patent Litig., 536 F.3d 1343, 1350 (Fed. Cir. 2008) (relying on applicant’s sworn declaration). See generally 35 U.S.C. § 102(a) (2012) (detaling the novelty bar).
423 See, e.g., Nobelpharma AB v. Implant Innovations, Inc., 141 F.3d 1059, 1071 (Fed.
Cir. 1998).
424 See, e.g., Therasense, Inc. v. Becton, Dickinson & Co., 649 F.3d 1276, 1283–84 (Fed. Cir. 2011) (en banc).
prevailing parties in “exceptional” cases.425 The Supreme Court rejected the Federal Circuit’s rule that confined the use of this provision to patent infringement claims that were “frivolous” or “objectively baseless,” or brought in subjective bad faith, and that required proof by “clear and convincing”
evidence.426 Placing these limitations on the provision largely rendered it superfluous, the Court concluded, because the common law already permitted judges to shift fees for bad faith lawsuits.427 Shifting of attorney’s fees is a fairly toothless remedy for a patent that has been improperly obtained but has been licensed out to third parties unaware of its deficiencies. Of course, all patents are probabilistic and judgments must be made about validity and scope, but they must be made with objectively measured good faith.
The time period and knowledge requirements for a Walker Process violation are not the same as those for determining pre-issuance inequitable conduct. The Walker Process doctrine considers what a reasonable patentee actually knew or should have known at the time of an infringement suit, which could be many years after patent prosecution activity. In some cases, a patent may have been obtained improperly but was subsequently assigned to an innocent purchaser with no knowledge of the improper conduct. In other cases, invalidating facts may not have been known at the time a patent was obtained but may have come to light later. Further, Walker Process is not limited to questions of invalidity resulting from inequitable conduct. It can also apply to cases that involve valid patents that are clearly not infringed or where the patentee sued without inquiring about infringement.428 The courts have even indicated that suit on an expired patent could be a Walker Process violation, although it is difficult to see how a lawsuit so easily countered could ever
425 35 U.S.C. § 285 (2012) (“The court in exceptional cases may award reasonable attorney fees to the prevailing party.”).
426 Octane Fitness, LLC v. ICON Health & Fitness, Inc., 134 S. Ct. 1749, 1755, 1757–
58 (2014).
427 Id. at 1758.
428 See Synopsys, Inc. v. Magma Design Automation, 2006 WL 1452803, at *1–2 (D.
Del. May 25, 2006) (holding that plaintiff adequately pled that defendant used fraudulently-obtained patents and public accusations of infringement and other disparagement to drive plaintiff out of business); Ecrix Corp. v. Exabyte Corp., 95 F. Supp.
2d 1155, 1158 (D. Colo. 2000) (permitting antitrust discovery on patentee’s basis for thinking that defendant’s device infringed the patent in question); United States v. Besser Mfg. Co., 96 F. Supp. 304, 312 (E.D. Mich. 1951) (dealing with machine alleged to have infringed but that patentee had never examined), aff’d, 343 U.S. 444 (1952); see also Jarrow Formulas, Inc. v. Int’l Nutrition Co., 175 F. Supp. 2d 296, 313–14 (D. Conn. 2001) (rejecting motion to dismiss on antitrust claim alleging that defendant’s prior patent infringement action was objectively baseless because it did not reasonably have ownership of the patent in question).
create durable monopoly power.429 Finally, unjustified threats to sue can also create Walker Process violations even if no lawsuit actually ensues.430
The Dippin’ Dots holding is unlikely to be disciplined by circuit conflict, even though it is an antitrust holding rather than a patent law holding and the Federal Circuit has exclusive jurisdiction only over the latter. Walker Process antitrust claims are virtually always presented as counterclaims on patent infringement suits, and in most cases they are compulsory counterclaims, which means that they cannot be separately brought.431 Prior to 2012, counterclaims to patent infringement actions were appealed to the regional circuits rather than the Federal Circuit.432 However, the Leahy-Smith America Invents Act brought counterclaims on patent infringement suits, including antitrust counterclaims, into the exclusive jurisdiction of the Federal Circuit.433 Direct attack remains a possibility for third parties such as purchasers, however. In In re DDAVP Direct Purchaser Antitrust Litig., the Second Circuit held that it had jurisdiction over a Walker Process style lawsuit brought by purchasers who claimed that they paid more for a branded drug as a result of an improper lawsuit intended to keep generics off the market.434 Significantly, such a lawsuit does not “arise under” the Patent Act, and thus is not within the exclusive jurisdiction of the Federal Circuit.